Calpers chief welcomes credit turmoil

The investment chief of the nation’s largest public pension fund has claimed the credit crunch that began with defaults on US sub-prime mortgage loans will aid the overall health of the financial system.

Russell Read, chief investment officer of the $245 billion California Public Employees’ Retirement System (Calpers), told Bloomberg: “The re-calibration of risk is inherently healthy and actually bodes well for investors in most markets …The moderate de-leveraging of the financial system is also healthy.”

Read said the correction would probably result in a good re-pricing of risk long term for most markets.

Read told Bloomberg that most investors believe the Federal Reserve will prevent a US recession in the US by limiting damage beyond the sub-prime mortgage market. It has already injected billions of dollars, but rumors are swirling that it may take more extreme action in the form of an emergency interest rate cut to restore equilibrium.

Ohio’s Public Pension Funds watching subprime mortgage crisis

The state's five public pension funds are keeping a close eye on the nation's mortgage woes

The funds that provide retirement pay and health care for tens of thousands of teachers , police officers, firefighters and state workers have more than a half billion dollars invested in subprime mortgages.

It's big money but still less than 1 percent of their total investments, so the funds appear sound, officials say. Much more is invested - roughly 10 percent - in more-secure mortgages, many of them guaranteed by the federal government.

Pension fund officials are more concerned about the ripple effect that mortgage industry woes are having on Wall Street.

Rising defaults on subprime mortgages - home loans made to people with poor credit - have rocked mortgage companies in recent months and dropped the value of some investments backed by such loans.

"We are concerned about the concern the market has over subprime," said Bob Cowman, director of investments for the School Employees Retirement System.

The Ohio Public Employees Retirement System, the state's largest pension fund with $82 billion in assets, has about $530 million worth of investments in subprime mortgages, or 0.64 percent of its investment holdings.

PERS spokesman Rich Baker said fund officials are not overly concerned because the subprime-mortgage investments are "relatively small compared to the overall portfolio."

The Ohio Retirement Study Council's most recent review of the five pension funds found they did well during the last six months of last year, with returns ranging from 8.9 percent to 12 percent.